What Are the Benefits for Foreign Firms to Cross List in the Us Markets?

What be the benefits for foreign firms to scar list in the US markets? Do the benefits remain after the SOX? Do you think the benefits would remain same(predicate) after the worldwide adoption of IFRS? Foreign companies atomic number 18 always looking for a new country to plant a flag and increase their ball-shaped market place. One of the ways that they do this in the stock world is through a process called indulge leaning. This practice allows a participation owned and operated in Country A to list their beau monde in Country B s financial trading exchange. well-nigh assimilate argued that introduction of Sarbanes-Oxley (SOX) and the ongoing plans of convergence between US GAAP and IFRS bedevil decreased the need for stigma listing. While there is a residual of opinion as to whether or not the practice is steady secure is this day an age I tend to believe that even if the benefits be not as robust as they once were they are value the investment Cross listing is when a corporation lists its equity shares on one or more foreign stock exchange in addition to its domestic exchange. (Wikipedia, 2013) The practice became very popular in the in 80s and hit its peak in the 1990s. Research has open a number of benefits and reasons for cross listing. Three models were geted to show the benefits of cross listing. They are the market segmentation / investor recognition model, the liquidity model, and the shareholder breastplate / legal bonding model. (Weisbach, Reese, 2002) When it comes to discussing the benefits of cross listing in the United States. Some of the benefits are as follows The first is that it will increase the visibility of follow in a global scale. Zhu, Small, 2007) Changing the visibility of a alliance from national to global offers a company a larger auditory sense who may not fork over been familiar with a company in the past. Second, companies shadow gain access to liquid markets. (Zhu, Small, 2007) A foreign company in a developing country may not have enough liquidity in its surrounding area for the purposes of investment and ripening. listing on substantial countries with large financial exchanges is a way to ten-strike into those economic resources that issuers are trying to find. Third, is to show that the company is strong. Zhu, Small, 2007) In a competitive industry such as the earning management and the stock market, investors are looking for strong companies to give their money to. It is up to the foreign firms to establish themselves. In some cases an audience with financial analyst that can vaunt the benefits of investing in your company is a way of building internationalist credibility with the investment world. Finally, cross listing is done in gild to follow tougher gestatements. This can show that a company is for real and price a look because they are willing to cross list in a country with tough exchange requirements. Zhu, Small, 2007) The overall benefits of cross listing ca n be summed up in a few nomenclature global exposure that leads to international investments from multiple countries that will fuel growth opportunities. There are critics that say that SOX has affected cross listing negatively due to its strict and stringent rules. In some cases, these are so different from a foreign companies home accounting policies that it makes it almost unachievable or the firm to comply. Congress has made it clear that U. S. nvestors are entitle to protection regardless ofissuer (Zhu, Small, 2012) SOX was established to protect investors from fraud by companies when they are reporting their performance to the SEC and regardless of cost the U. S. should stand foot those principles and try to keep companies honest. In my opinion the same benefits that cross listings had before SOX still exist the willingness of companies to comply with SOX and reap the benefits of cross listing. at once the convergence between US GAAP and IFRS is complete I still see a ben efit to cross listing.However, by sheer intonation to IFRS a company would lose the benefit of stricter exchange requirements. The move would require changes to legal and financial interpretations of accounting standards. However, the true consequences of this move to a global standard could not be determined until the framework of these standards was complete and instruction execution has taken place with U. S. and foreign firms. In closing, I consider cross listing a beneficial practice for foreign firms. I bear that we are living in an Internet world where I can invest in German company with a few clicks of a mouse.I also agree that we are heading towards a global accounting standard that will level the playing for all companies of all sizes in all countries. However, the benefit of cross listing that I see never going away is the visibility. Having a tangible presence in developed countries is key to growth. Having a presence in developing countries is a stepping-stone to bi g growth opportunities in the future. Bibliography Cross Listing. Wikipedia. Wikimedia Foundation, 17 Jan. 2013. Web. 20 Jan. 2013. Dobbs, Richard, and Marc Goedhart. Why Cross-listing Shares Doesnt establish Value. McKinsey Quarterly Autumn 2008 29 (2008) n. pag. Print. Reese, William, Jr. , and Michael Weisbach. Protection of Minority stockholder Interests, Cross-listings in the United States, and Subsequent Equity Offerings. NBER. Journal of Financial Economics, 2002. Web. 20 Jan. 2013. Zhu, Hong, and Ken Small. Has Sarbanes-Oxley Led to a Chilling in the U. S. Cross-Listing Market. Has Sarbanes-Oxley Led to a Chilling in the U. S. Cross-Listing Market. The CPA Journal, Mar. 2007. Web. 20 Jan. 2013.